ASEAN-EU Programme for Regional Integration Support (APRIS) Sub-project 04/07

OUTLINE • Background to the Study 2 • APRIS Study Objectives 9 • Verified NTMs in ASEAN 10 • Suggested Guidelines / Criteria 14 • Criteria for NTM Elimination 18 • Progress to Date 24

I. BACKGROUND • Elimination of non-tariff barriers oft articulated objective cf. 1977 ASEAN Preferential Trading Arrangement, 1987 Memorandum of Understanding on Standstill and Rollback on Non-Tariff Barriers, and 1992 AFTA-CEPT Agreement (amongst others). • Mid-1990s ASEAN Member Countries (AMC) agreed to develop work programme for elimination of NTBs as natural complement to reduction or elimination of tariffs under AFTA.

BACKGROUND (cont.) • Work programme to include: (a) Verification of information on NTBs; (b) Prioritisation of products / NTBs; (c) Development of specific work plans; and (d) Delivery of a mandate from ASEAN Economic Ministers to implement work programme. • Compared to tariff reductions (complexity, financial crisis, lack of political will?) little concrete progress made.

ASEAN’s Working Definitions ASEAN adopted UNCTAD scheme to include: • Para-tariff measures – customs surcharges, additional taxes and charges, decreed customs valuation; • Price control measures – administrative pricing, voluntary export restraint, variable charges; • Finance measures – advance payment requirements, regulations concerning terms of payment for imports, transfer delays and queuing; • Quantity control measures – non-automatic licensing, quotas, prohibitions, export restraint arrangements, enterprise-specific restrictions;

ASEAN’s Working Definitions (cont.) • Monopolistic measures – single channel for imports, compulsory national services; and • Technical measures – technical regulations, pre-shipment inspection, special customs formalities • 4 categories excluded by ASEAN: (1) internal taxes & charges on imports, (2) antidumping measures, (3) restrictive official foreign exchange allocation, and (4) automatic licensing.

ASEAN Co-operation on NTMs (cont.) • Roadmap for Integration of ASEAN (RIA) called for elimination of NTMs by 2010 for ASEAN-6 and 2015/2018 for CLMV. • 2003 Second Declaration of Bali Concord, envisaged creation of ASEAN Economic Community by 2020 with “transparency on NTMs and elimination of those that are barriers to trade”. • Recommendations of High-Level Task Force on ASEAN Economic Integration (Annex 1 of BCII) called on ASEAN to:

ASEAN Co-operation on NTMs (cont.) • Establish ASEAN NTMs Database by mid-2004; • Set clear criteria to identify measures classified as barriers to trade by mid-2005; • Set clear and definitive work programme for removal of barriers by 2005; and • Adopt WTO agreements on TBT, SPS, and Import Licensing Procedures and develop implementation guidelines by end- 2004. Recommendations constitute current objectives for NTM elimination in ASEAN

II. APRIS STUDY OBJECTIVES Objectives of 2004 APRIS study to: • Assess current approaches and recommend set of working definitions for various NTMs; • Survey current incidence of NTMs and develop criteria to identify barriers to trade; • Develop draft action plan for elimination of NTMs including major tasks, timelines and responsibilities of different actors concerned; • Suggest means for monitoring and reporting NTM incidence, including need for improved surveillance by relevant ASEAN bodies; and • Recommend follow-up actions required.

III. VERIFIED NTMs • APRIS study (analysis based on AMC submissions cf. www.aseansec.org/16355.htm) found non-automatic licensing most common, followed by technical regulations and prohibitions. • Licensing also required for reasons better covered by other NTM categories, e.g. licensing for SPS and technical regulations. • Quotas imposed by Brunei, Indonesia, Myanmar, Philippines, and Thailand. • Indonesia and Vietnam use most varied menu, although VN’s measures affect far fewer lines.

III. VERIFIED NTMs (cont.) • Indonesia and Philippines use para-tariff measures on all goods. All imports to Myanmar encounter automatic licensing and quotas. Many items in Indonesia also require licensing of both importer and product. • Tariff quotas imposed by Vietnam, additional charges by Indonesia and Philippines on 100% of goods, and internal taxes and charges on imports by Indonesia and Singapore.

III. VERIFIED NTMs (cont.) • Only Vietnam conducts administrative price fixing and restrictive foreign exchange allocation (for 0.1% of goods). • Antidumping measures reported by Singapore. • Automatic licenses given by Cambodia, Indonesia, and Singapore an additional transaction in import process. • Enterprise-specific restrictions implemented in Indonesia. Single channel for imports used in Indonesia, Philippines, and Vietnam. • Pre-shipment inspection reported by Indonesia.

III. VERIFIED NTMs (cont.) ^ not in ASEAN * requires prior permits ** for government imports and those under loans

IV. SUGGESTED GUIDELINES/CRITERIA Proposals made by various Working Groups / CCCA to: • Base order of elimination on (i) products or sectors; (ii) trade values qua products highly traded in ASEAN; or (iii) NTM category, • Use criteria such as: (i) number of private sector complaints, and (ii) difference between domestic and world prices (indication of how much trade hindered).

IV. GUIDELINES / CRITERIA (cont.) • Classify NTMs into: (i) NTMs maintained on products traded in ASEAN that require immediate elimination (red box); (ii) NTMs not clearly identified or classified as barriers (amber box); and (iii) NTMs which can be justified and maintained (green box). • Add WTO-consistency: (i) Non WTO-consistent NTMs, whether trade restrictive or not to be automatically eliminated; (ii) WTO-consistent NTMs that restrict trade subject to negotiation (for possible elimination); (iii) WTO-consistent NTMs that are not trade restrictive to be maintained.

IV. GUIDELINES / CRITERIA (cont.) Note: • WTO-consistency requires NTM to be transparent, non-discriminatory, scientifically based, and with no better alternative. Where NTMs have been verified, notification may not include all aspects of NTM administration, making transparency incomplete. • Discrimination against imports inherent to NTMs. Except for export restraint or production subsidies, NTMs operate on imports; whether or not the purpose is direct trade control, imports not domestic goods are the target. Most NTMs are therefore non-WTO-consistent and require elimination.

IV. GUIDELINES / CRITERIA (cont.) • Proposed elimination exercise first address most common NTMs, or import licensing procedures, and start with the 11 (or 9 goods) priority sectors.

V. CRITERIA FOR NTM ELIMINATION In sum, APRIS study recommended ASEAN: • Eliminate NTMs that potentially non-transparent and discriminatory in application. • Eliminate NTMs that transparent but discriminatory. • Retain NTMs with scientific basis, or which imposed for public health, safety, environment, religious, or national security reasons, but ensure uniform application to domestic & imported goods. • Replace NTMs with measures that transparent and achieve same objectives in less distortive manner.

V. CRITERIA FOR ELIMINATION (cont.) • Re-examine NTMs with protective objectives, in view of commitment to promote intra-regional trade. • Note - Replacement tariffs to be set within terms of CEPT. Alternatively, to cushion impact, tariffs to be set at rates with equivalent impact to the NTM / gradually reduced to be less discriminatory against imports over time.

Applying the Criteria • Criterion (1) includes administrative pricing, non-automatic licensing, quotas, enterprise-specific restrictions, pre-shipment inspection. To be replaced with tariffs, fiscal incentives, or risk management with post-entry audit systems at customs. • Criterion (2) includes prohibitions on “non-sensitive” goods, single channel for imports. Tariff quota duties, antidumping measures, and restrictive foreign exchange allocation are not included in ASEAN scheme (last two affect products outside 9 priority sectors, whilst antidumping covered by WTO rules).

Applying the Criteria (cont.) • Tariff quota duties may be tariffied. • Prohibitions usually imposed on sensitive goods for national security, religious or moral, health and safety, or environmental reasons, hence ones covering “non-sensitive” goods to be tackled first. • Single channel for imports may be replaced with tax, incentives, regulations on domestic consumption or operation of buffer stock depending on purpose of relevant NTM.

NTMs in Priority Sectors • ASEAN selected 11 sectors based on potential for (a) combining the economic strengths of ASEAN members for regional advantage, (b) facilitating and promoting intra-ASEAN investments, (c) attracting and retaining manufacturing and other activities within ASEAN, (d) promoting outsourcing within ASEAN, (e) developing “made in ASEAN” products and services. 9 of the 11 concerned with trade in goods: agro-based, fisheries, healthcare, rubber, wood, textiles, information technology, electronics, and automotive.

NTMs in Priority Sectors (cont.) • NTMs to be reduced or eliminated where occur in Sections whose products fall under the 9 priority sectors: electrical equipment, organic chemicals, motor vehicles, tobacco, cereals, sugar, cosmetics, beverages, cereal/flour/milk preparations, edible fruit and nuts, pharmaceuticals, cocoa, dairy products, coffee/tea/spices, live animals, vegetables, meat/fish preparations, vegetable preparations, waste from the food industry, seeds, live trees, meat and edible offal. • Most often Sections with high NTM incidence covered by priority sectors (so confirm priority selection).

VI. PROGRESS TO DATE (cf. HLTF) • Establish ASEAN Database of NTMs by mid-2004. Yes (cf. www.aseansec.org/16355.htm) but no cross-verification so far; mainly use UNCTAD TRAINS data / AMC own submissions. AMC to notify changes to ASEC. • Set clear criteria to identify measures classified as barriers to trade by mid-2005 Proposals of APRIS study presented to 35th CCCA (January 2005). Criteria (and box system) discussed at 36th and 37th CCCAs. Questions re. transparency, freedom to apply special measures on sensitive products, retention of WTO consistent measures (e.g. SPS and environmental regulations), application of criteria, etc. Criteria endorsed by 19th AFTA Council (27 September 2005).

VI. PROGRESS TO DATE (cont.) • Set a clear and definitive work programme for the removal of the barriers by 2005. Discussion paper from ASEC at 39th CCCA (January 2006). To be completed by 20th AFTA Council. Excel submissions coded as red, amber and green boxes. 2006-2007 re-examination and peer review. 8 of 10 AMC endorsed draft work programme at 40th CCCA (March 2006). • Adopt the WTO agreements on TBT, SPS, and Import Licensing Procedures and develop implementation guidelines by end- 2004. [n.a.]

Thank You ASEAN-EU Programme for Regional Integration Support ASEAN Secretariat 70A Jl. Sisingamangaraja Jakarta 12110 Indonesia T: (6221) 7262991, 7243372, extn. 412 (or 268) F: (6221) 7398234, 7243504 or 7262955 E: apris@aseansec.org

ASEAN-EU Programme for Regional Integration Support (APRIS) Sub-project 04/07